Well the streak is over. Following a record-setting 12 daily declines, crude oil finally got back in the winner’s circle with a 1% rise. But it may be too early for those bullish on oil to start popping the champagne corks, because with ongoing concerns that the market will remain oversupplied in the near-term, it’s still unclear whether the current downtrend has reached the trough yet.
The International Energy Agency (IEA) released a report saying that it expects supply to exceed demand in 2019, but this news was offset by growing speculation that OPEC will look at cutting daily production by 1.4 million barrels per day when it meets next month. Overall, the oil market reacted more to the OPEC rumours, and this pushed the WTI price higher to US$56.25.
Speaking of losing streaks, there are a few notable ones on the US equity market right now, with the S&P 500 closing lower for a 5th straight day, while shares of Apple Inc. were also lower for a 5th day in a row on broker downgrades of iPhone sales. The DJIA index closed 0.8% lower and the NASDAQ lost 0.9% in what was a broad but largely negative trading range on Wall Street.
US CPI data came out as expected at a 9-month high and while this didn’t particularly unsettle the market, traders remain in a defensive mode ahead of a probable FOMC rate hike next month and continued uncertainty over Chinese and US trade relations.
A Brexit draft proposal has been released, and this gave a boost to the GBPUSD rate to the tune of a one third of a percent rise on the day. The nearly 600-page draft paper has been backed by Theresa May’s cabinet, but with many vocal opponents of the deal it remains to be seen whether this draft will make its way through Parliamentary approval, and if so, what if any political fallout will occur.
But for the moment, GBPUSD had a modest rise as did the EURUSD which made similar gains in another session where the US Dollar was weaker. The EURUSD rate cleared the 1.13 resistance level but remains shy of the sterner test which awaits north of the 1.1350 level.
The AUDUSD rate moved 0.3% higher during offshore trade, with the Aussie following the Euro and GBP moves against a weaker US Dollar. The release of Australian employment data today could inject some intraday volatility into the local market, particularly if the result comes in substantially different to the 19.9k jobs that are expected to have been produced in September.
Historically, the employment figures in Australia have been notoriously difficult to predict. For example, last month the expectation was for 15k jobs, and the result was 5.6k, and the month before, we were expecting 16.5k jobs, whereas the actual figure on release was 44k. And this trend of significant misses, both high and low, goes back much further. We’ll see what happens today, but any surprise result on the upside could stand the AUD in good stead for an attempt at the 0.73 handle.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower